CLINTON — Budget talks for fiscal year 2014 began Monday as Clinton City Council members met for a special workshop to review the city’s financial outlook.

City Finance Director Jessica Kinser led the discussion, which was the first in a series of six that will occur over the coming weeks.

Monday's discussion focused on three parts of the budget. First, debt service funds, which consist of revenues and expenditures for judgements, general obligation bond interest and principal, lease agreements, loan agreements and registrar fees.

Following was a discussion of capital project funds, which are used for infrastructure projects and capital requests from city departments.

Kinser discussed also  special revenue funds, which cannot be lumped in with other expenses. Additionally, Kinser provided council members with analysis of the debt capacity and the tax levy.  Ultimately, she said, the city is facing another rise in taxes and possible cuts.  

The City Council is scheduled to hold five other budget workshops before the budget is certified mid-March. The next workshop will be from 3 to 5 p.m. Monday.

The discussion will focus on the general fund, road use tax fund and general government and transfers.

DEBT SERVICE FUNDS

The city previously had different debt service funds for each debt the city incurred. However, as of this month, all debts have been consolidated with the exception of the Hyvee Economic Development Note and the Medicare Settlement fund.

The three funds produce a revenue of $4,517,151 a year and require exactly the same amount of expenditures from the debt service tax levy. Because the millions the city spends to pay debts every year has consistently risen, Kinser is proposing the debt service levy should rise by .6 per $1,000 of assessed value, to 2.63 mills for fiscal year 2014.

The city's budgeted debt service expenditures for next fiscal year are 60 percent higher than the current year's. This can be attributed to the city taking on more debt as well as a 2008 general obligation bond that the city was only paying interest on for the first three years. Now the payments on interest and principal from that bond amount to more than $1 million a year.

The city is also facing two unknowns as it plans for the fiscal year. First, it will sell two refunding bonds in February. Second, the interest from a Build America bond that the city uses to pay principal and interest payments may drop by 7.6 percent due to federal sequestration, causing the city to lose $4,500 that is budgeted. 

CAPITAL PROJECT FUNDS

The discussion on capital projects absorbed a majority of the meeting. Projects for fiscal year 2014 consist mainly of street projects, but projects from the other departments made the list also.

City Engineer Jason Craft explained the projects that will be completed in the remainder of fiscal year 2013 as well as the ones proposed for fiscal year 2014.

Next year will be the first in a six-year period that the pavement management program will be funded with $2.7 million, more than double the $1.3 million the program had this year.

“We're stepping up to the plate over the next six years. Our goal is to pave and improve every road in town that won't be included as part of a future sewer project or hasn't been constructed or reconstructed in the last 10 years,” Craft said.

The funding will come from $1.5 million in local option sales tax and $1.2 million through general obligation bonds. In the first years, the roadwork will focus more on resurfacing on residential streets and collector streets. Towards the end of the six-year period, more reconstruction will occur.  

Recreation director Gregg Obren discussed three capital projects that are on the horizon for the Riverview Swimming Pool: a drop slide, an ultraviolet sanitation system and a new bath house. These projects would be completed with hotel/motel tax allotted for Vision Iowa projects. The drop slide would cost $70,000, the UV system $53,000. These figures account for a 25 percent match from a Clinton County Development Association grant that would still need to be applied for. The bath house, which council members suggested, would cost $200,000 if done completely with all upgrades.

A more modest approach would likely total $34,000, Obren said.

Updating city computers also made the list of capital projects with an anticipated cost ranging from $59,000 to $100,000. This cost also does not include the police department computers, which Police Chief Brian Guy said his department is pursuing separately from the city.    

Individual departments did not make requests, but will do so during their allotted time in the coming workshops.

SPECIAL REVENUE FUNDS

Special revenue funds are proceeds from specific purposes such as National Night Out or the Community That Cares Summer Youth Program, which are typically required to be accounted for in separate funds and spent for specific purposes.  In prior years, these special funds did not have budgets, but this year they will. The special revenue funds are further broken down into three categories: departmental, administrative and tax levy — among them the hotel/motel tax fund. The city receives a 7 percent tax from hotel/motel stays. Of that, 5 percent is split between the Clinton Area Chamber of Commerce and the city.

The other 2 percent goes towards Vision Iowa projects. Between 2011 and 2012 when the Best Western Frontier Inn closed, the city saw a 6.2 percent decrease in revenue from this fund.

For fiscal year 2014, the city is expecting to put $61,784 from hotel/motel tax into the general fund and another $98,854 for Vision Iowa projects at Riverview Pool.  

The police and fire retirement levy is one fund that could become an issue because of rising costs to the city because of state law and lack of state contribution, Kinser said. 

DEBT CAPACITY AND TAX LEVY ANALYSIS

Kinser ended the workshop with a discussion about the city’s debt capacity and tax levy analysis.

Legally, the city cannot have a debt capacity above 5 percent of the actual value of all taxable property within corporate limits.

Kinser has suggested the city cap itself at 75 percent of the 5 percent, leaving the city to borrow up to $3.9 million before going over the suggested capacity. Based on proposed borrowing for fiscal year 2014, the city would be left with $1.2 million in effective capacity.  

In fiscal year 2014, Kinser is proposing a 16.98725 levy, up from last year due mainly to employee benefits and debt.  

“The areas that we need to focus on more, (are) benefits and debt, those are the two areas where we can try and control what we’re doing,” Kinser said. “Unfortunately, this year, and I'm kind of foreshadowing next week, it's going to be tight. We're going to come to you with a...it's going to be a deficit. It's not going to be a huge deficit.”

Ultimately, she said, operational costs will not be possible without making additional personnel cuts, but that will be addressed during the general fund discussion.